Friday, February 21, 2014

On January 30, the FCC green-lighted
geographic trials in which incumbent voice providers will offer all-IP
technologies in place of copper-based legacy telephone service. In its IP
Transition Order,
the Commission stated its intent to “act with dispatch,” and to “facilitate the
momentum of technological advances that are already occurring.”

The FCC staked
out the right approach to promoting the transition to all-IP networks. But that
same sense of urgency needs to infuse the Commission’s broader responsibilities
that bear on the IP transition.

The FCC is not proactively using its forbearance
and waiver authorities to free next-generation technologies from legacy
regulations. And if not eliminated, legacy regulations will continue to serve
as a harmful counterweight to broadband deployment and competition. Now that
the groundwork for IP transition trials is set, FCC forbearance from legacy
regulation of broadband-related services remains part of the unfinished
business of the IP transition.

In its IP Transition Order the FCC explained:

Modernizing
communications networks can dramatically reduce network costs, allowing
providers to serve customers with increased efficiencies that can lead to
improved and innovative product offerings and lower prices. It also catalyzes
further investments in innovation that both enhance existing products and
unleash new services, applications and devices, thus powering economic growth.
The lives of millions of Americans could be improved by the direct and
spillover effects of the technology transitions, including innovations that
cannot even be imagined today.

Indeed, the
consumer welfare benefits resulting from modernizing communications networks should
be obvious. Even a cursory view of the dynamic changes that have taken place
over the last two decades in the advanced communications market confirms this.
Competitive broadband Internet services have appeared. Old phone monopolies
have disappeared. Consumer choice in IP-based services is now abundant.

But despite
digital age advances in competitive choice and technology, too many legacy telephone
regulations remain in force. Outdated, unnecessary, and often
arbitrarily-enforced, such restrictions are actually putting a drag on the
increasingly IP-based world.

A case in point
is FCC’s unjustifiable, selective regulation of CenturyLink’s broadband
enterprise services.

Businesses with
special communications and information technology needs often seek out
enterprise broadband services to meet those needs. Typically, such businesses
are savvy customers, willing to consider competing offers for the best
customizable deal. The national broadband enterprise services market has over
two dozen competing providers. Because the
enterprise broadband market is highly competitive, there are no dominant
carriers. The enterprise broadband services offered by all traditional
incumbent voice carriers were relieved from legacy telephone regulations more
than years ago – all except for CenturyLink, that is.

Inexplicably, some of CenturyLink's Ethernet and other broadband
enterprise offerings are still subject to dominant carrier and Computer
Inquiry tariff obligations. This leaves CenturyLink stuck with dominant
carrier restrictions on its ability to offer flat-rate pricing on a nationwide
basis to potential customers. Tariff obligations require CenturyLink to give
the public advance notice of its price offerings, giving rivals a jump in
luring enterprise customers.

Unfortunately,
the FCC is not proactively using its forbearance and
waiver authorities to free next-generation technologies from legacy
regulations. In 2012, CenturyLink petitioned the FCC for forbearance relief. The proceeding failed to
turn up any evidence that CenturyLink possessed market power. But the FCC
pressed CenturyLink for additional information – a thinly veiled signal that the
Commission was unlikely to grant forbearance. Not surprisingly, CenturyLink
withdrew its petition.

Now
CenturyLink is again seeking forbearance relief from legacy
regulation of its broadband enterprise services. FCC Chairman Wheeler should
make granting justified forbearance relief on a timely basis a priority.

Rule
of law considerations also warrant forbearance relief. As it now stands, one
major provider of enterprise broadband services is placed at a significant
regulatory disadvantage compared to all competitors. This is unequal treatment
under the law, plain and simple. Judicial precedents applying the Administrative
Procedures Act’s “arbitrary and capricious” standard make clear that agencies
cannot treat like cases differently. Rather, agencies must apply the same
criteria to all parties that petition for exemptions.

Finally,
there are regrettable but
important lessons to be learned from FCC’s record of foot-dragging on
forbearance relief. The Section 10 regulatory forbearance process, particularly
when applied in light of the Commission’s procedures, still treats legacy
regulation as the default position. By placing the burden on market competitors
to obtain regulatory relief, the process tends inherently to preserve the
status quo rather than lead to prompt reform.

A new
Communications Act must reverse that presumption. Where markets are
competitive, free markets should be the default approach. The burden should be
on the regulators or pro-regulation parties to offer evidence justifying
government intervention and restrictions. Actual evidence of market power and likely
consumer harm should supply the deciding criteria under a new Communications
Act.

The FCC needs to
bring the same urgency to its elimination of legacy regulation of broadband
services as it demonstrated in approving experimental trials.Putting an end to its unnecessary and
arbitrarily-applied regulation of enterprise broadband services would serve as
a solid first step. For now FCC forbearance from legacy regulation of
broadband-related services is unfinished business of the IP transition. Forbearance
should become an IP transition imperative.